A few readers of the DMConfidential.com shared their opinions on the ringtone marketplace. Both of these comments come from people who make their living by finding ways to promote CPA offers.

The first comment - I dont think this will last for long...the customers for the ringtone
offers (12-25 yr olds) are very tuned to each other and one's bad
billing expirence will spread word-of-mouth/viral to others quickly and
so i think the conversions will go down.
I am seeing this already, the conversions are downhill but the
competition is way up - a classic sign of a mature leadgen market!.

The second commnet - Ringtone offers suck. They aren't converting well anymore. Legislation
is cracking down on the usage of the word "FREE." Companies involved,
like Blinko, are pulling out of the market.
In my personal search campaigns, Ringtones are no longer profiting. I
recommend e-mail submits, smiley downloads, screensavers, and
especially dating offers such as eHarmony.

This isn't to say that comapnies cannot make ringtone offers work, only that the landscape for promoting them has changed quickly and looks to change more.

Those that know me have probably seen that I have an odd passion for the economics of online offers, that is, trying to understand and explain why certain offers do well and what it takes for an offer to succeed - not just any offer though. We are talking about the ones that have the ability to generate millions of dollars in monthly revenue and especially those where generating such returns doesn’t seem to make sense. Such offers do not occur often, and more often than not, they tend to target no one in particular, meaning that anyone and everyone might become a potential conversion. Sometimes a single company creates such an offer and offer becomes the only one to promote. In other cases, a multitude of companies jump on board and the offer spreads at an almost unimaginable speed throughout the net. Classmates created such an offer. Colonize did too, but in the case of the latter, theirs morphed into an entire industry, the incentive promotion space.

As I have written about previously, the incentive promotion industry took off arguably because of two things – the Internet advertising bust, which made ad space affordable, and the lack of competition in email marketing. The lack of competition in email meant that offers would get delivered, and the uncluttered environment led to incredible click through rates and conversion rates. Almost any new ad unit – the banner, the pop, etc. has a similar cycle, where one sees unbelievable response rates during the novelty phase and decreasing returns as users become acclimated or worse, inundated. Adware saw this; those in the beginning, for example, could make money without having to invest in any specialization. They created no value adding end user product, needed no advanced behavioral targeting, and survived off minimal, if any, staff.

Incentive promotion, among the best example of a “super offer”, has lasted much longer than I certainly thought it would. Having been among those that drew inspiration from Colonize, I thought it would not make it until today. Experian Interactive’s decision to shutter Metareward suggests something might be afoot, but companies continue to find ways to thrive with these offers. Interestingly, Colonize who, along with Bonzi, deserves credit for showing others how to take untargeted traffic and turn it into money, went from being among the net’s top advertiser to relative obscurity. That is until now. Surf around some sites, and you will probably come across one of their banners. The market behind their reemergence is best illustrated in the following story.

Before boarding a flight returning from San Jose about two months ago, I saw next to me a boy no older than 13, cell phone in hand and game magazine open on his lap. He was texting on his cell phone, but it wasn’t until I looked closer that I realized what he was doing. The magazine sat open to a showy ad taking up one of the pages. The boy was typing codes into his phone trying to claim his free ringtones. His mother sat a seat away oblivious to his actions, but that surely changed when the bill showed up. And, while it may seem isolated, the youth’s actions typified an amazing multi-billion dollar per year micro-commerce industry where consumers can purchase goods and services without their wallet. His actions also reflect what tens of thousands of other people do each day, many of them through ads placed by companies like Colonize and affiliate networks such as AzoogleAds. They sign up for mobile content.

Those outside the performance marketing world might not even know such ringtone offers exist. If they do, at best they associate them with poorly animated 15 second ads appearing on MTV. Those who have anything to do with ad networks, paid search, and/or email know something else, that ringtone offers have in many cases usurped incentive promotion for top billable honors. The creators of the first ringtone offers probably didn’t realize what they created, but in less than a year, countless companies have made their living by finding areas to promote ringtone offers.

Ringtone offers do so well that some affiliates can earn six figures monthly promoting them, meaning that certain ad networks make millions each month from them. They are today’s “it” offer and share much in common with incentive promotion offers, from offer strategy to their timing in the overall maturity of the marketplace. Said another way, with mobile content offers, as was the case initially with incentive promotion users, as a whole, have a relatively poor understanding of what they are getting into. Secondly, the bounty, i.e. the CPA paid to those hwo distribute it remains seemingly high compared to what is involved to earn it.

For the unfamiliar, what I call ringtone or mobile content offers are really subscription offers. Users sign up for a freemium which comes with the, not so obvious, weekly or monthly charges. The companies behind the offers estimate how long a user will stay on before wising up and offer a percentage of that total revenue to the networks. Such subscription models are what enables a company like Blockbuster or Netflix to pay more than $20 for a new user; they are what sparked Columbia House and BMG’s growth online several years back where they could pay $15 to $20 to give away CD’s.

What separates mobile content offers from the others is that they do not require a credit card. This makes the barrier from a consumer perspective very low. They just need to enter their cell phone number and perform a confirmation. This means a whole new generation of consumers has buying power. Additionally, users, especially these users, do not associate the action with potential payment. With other subscription services, you won’t find users quickly entering their credit card number, especially for a free offer. This is because after enough experiences they instinctively realize they might sign themselves up for something. Equally important, many of the users who often click on these offers don’t have credit cards to begin with, making them ineligible. The ability for almost anyone to pay is one major thing that separates ringtone offers from incentive offers. Incentive offers have a low barrier of entry and appealing offer, but the only subscription model they can leverage is that person joining an email list, and unfortunately for incentive marketers, an email address does not act as a form of currency.

Like email and adware, the mobile phone represents the next frontier in marketing. Unfortunately, both email and adware didn’t manage their success well. Email is just coming back after about 18 months in recovery, and adware is just starting the recovery period. Whether it returns, remains to be seen. The mobile phone is, on the other hand, riding the steep upslope. How high will it go and how long can it last is the big question.

Last November, rumors circulated that Google had purchased facial recognition company Riya. (Giga Om and Search Engine Watch). The deal was not cheap at a rumored $40 million. If that transaction went through it's not obvious as Riya's whois information remains shielded via Domains by Proxy. Regardless, it's worth checking out the software, as it returns a unique viewing experience, kind of like the comments in Flickr photos only done automatically.

The new rumor: Google will shortly purchase Santa Monica, CA based Nevenvision.com, a company that has also created facial recognition software. Neat as such software is, I suspect the real power behind Nevenvision is the commercial applications they have already put in place using their image recognition software. Not some "2.0" company whose product might have a use somewhere, Nevenimages has technology that will not only help Google Images but transform how Google interacts with consumers and brands.

Nevenvision will do for mobile what Applied Semantics did for content ads. It will push Google ahead of others and could very well have Google earning more through mobile applications in foreign markets such as China than they do via PC based web efforts. One read through of Nevenvision's (confusing) product description for consumers shows how, "Shoot the CD cover of your favorite artist and get a sample MP3 or ring
tone or enter to win concert tickets. Shoot an ad in the newspaper and
get a coupon or product information." This is powerful stuff that not only fits well within Google's mission but can actually make them money.

Note - if this rumor proves true, this is pretty much a one off. As much as I like to see my subscriber numbers increase, it's time to get back to what I actually know - lead generation, incentive promotion, domain monetization, ad networks, arbitrage and a smattering of email.

Here is a piece I wrote for the DMConfidential weighing in on the rumored but failed aQuantive / Valueclick merger.

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Two weeks ago, when the announcement of a merger between acquisition happy Think Partnership and iLeadMedia hit the wires, talks between two much larger companies considering a merger were breaking down. The potential merger would have combined two multi-billon dollar market cap companies, but in a parallel to the July 2005 story of Microsoft almost buying behavioral ad company Claria, this potential deal seems do-able but not a clear winner.

Valueclick Media and aQuantive, the two companies rumored to have been in talks both have market caps hovering around $1.8 billion and are trading within 10% of their 52 week highs. By online advertising standards, the two companies seem almost ancient. Each began during the dotcom boom and survived the bursting of the bubble to become one of the few billion dollar Internet advertising companies. Organic growth, though, does not describe these firms. They grew the old fashioned way, by buying other companies for good prices. In this week’s Digital Thoughts we look at whether a merger of the two would have made sense, we must look at their pieces. What we’ll see is that one grew in an organized unified story fashion, whereas the other has simply swallowed up firms, like the Japanese did U.S. real estate in the 1980’s.

Combined Valueclick and aQuantive have made almost 20 acquisitions over the past six years. While aQuantive has done a more than respectable job of buying others, Valueclick takes the crown in a tête-à-tête of acquisitiveness. Valueclick equipped itself well for purchases after a fortuitously timed IPO in 2000. Like any fiscally responsible firm, they made many of their purchases in stock including 2001’s Mediaplex and Adware for $49 million and 2002’s BeFree for $128.5 million. Before those, however, they bought four companies in 2000 post-IPO for cash. Among those purchased included StraightUP!, OnResponse, ClickAgents (the founders of which run Blue Lithium), and Z Media.

In 2003, Valueclick added Commission Junction, Search 123 and Hi-Speed Media, with Price Runner following in 2004. In 2005, they acquired three more companies in well-covered deals – Webclients, E-babylon (411inkjets.com among other brands), and Fastclick. A quick summary of their unites includes competencies and/or units in adserving, email, advertiser tools, CPM display network, co-registration, inkjets, PPC, incentive marketing, and affiliate marketing. Some are more active than others and several acquisitions shuttered after the purchase. Given the sheer volume, chances are I missed at least one, but just among those listed we have Valueclick buying 12 companies whose aggregate sale prices top $500 million.

As someone who tends to take pride in knowing different businesses and their models, it occurred to me during Ad:Tech NYC 2005 just how little I really knew of aQuantive’s. That makes a run through of their purchases tougher, but in some ways helps explain why upon reading that aQuantive and Valueclick might have merged, it didn’t make sense. I know Valueclick because they make most of their money in areas I know pretty well –ad networks and direct response (including email, co-reg, and incentive promotion). aQuantive on the other hand has very little to do with any of those sectors. Their biggest unit remains their agency business, which served as the foundation for the company when it was known as Avenue A prior to the 2003 name change.

Most won’t remember Avenue A’s purchase of iballs in 1999, but most did hear of the $160 million they paid for SBI.Razorfish, creating I believe the largest independent interactive agency. Those with a good memory of the dot com boom will certainly remember the Razorfish name. That company was among the leading web design consulting firms during a time when web designers were today’s Ruby on Rails programmers. Few companies had the same reputation for arrogance, for turning away clients, not to mention a higher percentage of job applicants than most Ivy League schools. It typified the dot com boom, taking 1200 employees to Vegas one year and finding a way to go from $13.5 million in sales to $170 million the very next year, even though it managed to lose $14.5 million overall. The company crashed and SBI picked them up for a mere $8.2 million in 2003.

SBI, once known as SBi, had a knack for finding and buying once high flying companies. They also purchased the other F’d Company regular, March First, a company that at one point had a valuation of $13 billon even though it lost more than $100 million each quarter during that same time period. In 2002 the company bought one-time high flier Lante for $41 mllion (a company that at least began in the first tech boom, 1984) and former internet consulting firm Scient for a mere $4.9 million. It all seemed to pay off though in the end.

History aside for a moment, the sale of SBI Razorfish made sense for aQuantive. It bolstered their design talent, tech talent, and most importantly their client list. Razorfish also fit in nicely with another ad agency the company bought in 2002, i-Frontier. More importantly, the roll-up of agencies fits in well with the technology unit of aQuantive – Atlas, an ad serving platform. The company further bolstered its technology solutions with its purchase of GoToast in December 2003. This helped aQuantive became the first of the major ad serving firms to have a parallel offering for search marketers. Now instead of being just a design firm, they could offer their clients a full suite of integrated solutions to track their buys and spend effectively.

The only connection aQuantive has to the performance marketing world is its DrivePM network that launched officially in 2004. Buying inventory across sites and reselling it to advertisers, adding value via targeting, seemed like an attractive area for growth in 2004, and the unit reached stand-alone profitability that same year. Not knowing much about DrivePM – its scale, success, and/or reputation in the marketplace, it’s hard to aQuantify its success since then, or the value it brings to the heavy brand and technology focus of the companys’ other divisions.

With aQuantive we see an integrated and coherent story, whereas with Valueclick we see a group that has managed to buy well and continue to eek out solid earnings and growth in competitive markets. Putting aQuantive and Valueclick together, though, just doesn’t seem to add-up. The Motley Fool points out what someone in the office did, that mergers of equals tends to pose big challenges. But, are they really equal? In my limited view, the only winner in the deal would be Valueclick. They stand to benefit a lot more from the relationships, skillsets, and technology at aQuantive than vice versa. What they offer in return are many clients and units that don’t mesh with aQuantive’s culture and process. Valueclick could make a good user of aQuantive products, but I’m not sure that warrants a merger.

The last piece I wrote about online lead generation covered the basics of lead generation and arose out of an agency/broker’s desire to get a CPA price quote for an unnamed school. Instead of simply saying “$50”, I proceeded to write out a lengthy reply on why quoting a single number poses a challenge. Today, we look at a related topic - the various strategies lead generators employ to drive leads to a school. What makes this topic so interesting is that as recently as five months ago, a few on this list were considered on the fringe. The increased cost of traffic to lead generators and desire for schools to focus on a narrower band of providers has opened the door, though for some, once fringe, concepts to make their way into the mainstream.

The “fringe” activity in this case is the desire and push by lead generators to promote more than one school as part of the sign-up process. Three companies have made the greatest in roads – Quinstreet, ClassesUSA, and Nextag. In the case of Nextag, they only promote education in this fashion, whereas both Quinstreet and ClassesUSA offer schools several different ways to generate leads. Below are the four most common mainstream strategies used by lead generators. In this piece we focus on the presentation of the school as opposed to whether visitors came from search, display, email, etc.

1) Single school landing page

Exclusive lead, i.e. a student sees one brand on the landing page and can sign up for only one school.

Form fields usually present; strong call to action; an information gathering page rather than an information giving page.

Generally the highest quality but also among the most expensive.

Viewers tend to see either a general landing page for the school,l or among the more advanced lead generators see a degree specific page, e.g. Criminal Justice based on prior intent, i.e. a click on a tab on banner or search query

Some lead providers will, upon completion of this type of page, show a follow-up page with other schools; some schools will bar this, seeing it as leveraging their brand for a competitor.

2) Directory style page / Homepage placement

Among the oldest style for generating leads.

No form fields present; limited if any call to action; a focus on information giving.

Many schools co-exist on a page that typically look to provide users a way to navigate to a particular degree / school combination.

The non-sales, exploratory approach means that viewers will often convert on more than one school.

Seen as a clean and often preferred way for vendors to generate leads.

Easily digestible and as a result historically the type of page show to schools by vendors when attempting to work together even though it drives a smaller percentage of leads.

3) Multi-school “Shared Lead” page

Credit goes to ClassesUSA for the nickname

Marketing message driven page; focus on information gathering.

Similar to the exclusive lead form except more than one school is presented on the page

Unlike a directory page, focus is on a user completing a form rather than navigating deeper into the site.

Nicknamed shared because after a user completes the form for a particular school, the page presents the user with other schools that offer the same or similar program, storing the user information so that they simply must click one or two times to be submitted to the next school.

Students tend to sign-up for more than one school

Some schools have seen only minimal degradation in enrollment rates by a switch to the shared model; whereas others have seen sharp decreases.

Gaining increased acceptance among schools, albeit reluctantly.

4) Forced shared lead page

Currently only used by Nextag and allowed with them given their size and clout in the mortgage lead generation business.

Page mirrors their mortgage form in that users complete information in the first part of the form and then are “matched” to schools on the second part

Students will sign-up for more than one school (assuming a degree of interest is selected that more than one school offers.)

Lead degradation occurs, but it’s not linear, i.e. a lead shared 3 times does not perform 1/3 as well. Closer to one half.

Most controversial page as it presents the least information per school and does not offer a way for a user to learn about a school and select just that school.

Additional controversy and push-back from some major institutions due to its commoditizing education. With the schools being given little to no room for differentiation, such forms have the potential to impact negatively the sector, especially if others jump on board. Users will lose out and the page will be seen by accrediting bodies similar to co-reg being run on incentive sites.

The first type of site to have volume caps reduced and be seen as expendable.

In Effectiveness in Lead Generation and Finding the Sweet Spot we hit upon a few of the reasons why mortgage has scaled so easily and the challenges that online education faced in doing the same. What we see here are companies breaking free of those constraints, but the results of these new formats will determine its long-term success, of course. The best bet for vendors is to treat these strategies like a portfolio and have diversity. The new formats might have strong growth but they are also the most volatile.

Having had three tradeshows in the past two weeks, I am behind on both my replies and my posts. Much of what I had is now old news, i.e. two days ago. I post them at the end mainly as an archive tool for myself. To begin, here are two things you might not have seen that are not time dependent.

Links for May 10, 2006

Rob Deichert shares a great post that not only showcases a person for whom online education worked but provides incredible material for all the marketers trying to think up new landing page and banner themes

LowerMyBills has finally made it you might say. See this quasi-fan blog dedicated to their ads

Valueclick / aQuantive almost merger (something I will write about in detail)- Motley Fool and Reuters

New Yahoo Search Platform to launch- expected to bring in $600 million. More than anything, I see this as a sign that auctions are inefficient to the advertiser but effecient to the one putting on the auction. I'm currently reading the Perfect Store which harps excessively on the eBay founder's belief that an auction creates a perfect marketplace where supply meets demand. I contest (although I'm not economist and have zero proof) that auctions skew high or low - they rarely meet where they should because human nature / psychology effectively push one of the curves unnaturally. People are irrational in auctions and that irrationality impacts the final price. With Yahoo, better relevance and optimization on RPM will help but the closed bidding will account for a large chunk of that increase.

With IE7 having an MSN search bar (bound to hurt Google), Bambi brings up a good point - MySpace should create a search engine. MySpace is this generation's AOL. It's a largely self-contained universe and its users would most likley perform a search through that site than going to an engine.

Don't hesitate to contact me blog(at)jayweintraub.com or jay(at)oversee.net if you have questions, ideas, or simply want to bounce an idea my way.

Like many creative thinking types, I often have more ideas than I know what to do with; some I would like to think I create someday; others just take up space and cause mental irritation because I know I probably won't get to them. Here is one of those -

Targus Info has made quite a name for itself and quite a business providing data validation, their services becoming the Akami of data validation for lead generation companies. I'll have to ask Dave over there if their service offers standard USPS look-up, but that's another topic.

What would help, and Targus could do this, but most likely a company such as Datran looking to expand their revenue stream should offer this, is an email validation service. This is nothing new; when I did email collection through a registration process, I wanted a better system for validating names. It's pretty easy to see if the domain exists and has a mail server set up on it. Finding a way to determine whether the actual address works and should count as valid is something else.

The idea that would seem to work is for Datran or a similar firm to allow others to send over an email address and have them score it for them. The first level of scoring would be whether that address exists in their database or ever has. They would them help shed light on that name by providing any deliverability information - name is valid and receiving email; name was in database but unsubsribed (meaning it is still valid); name is in database but not active (not opened email); name is a spamtrap do not send, etc. With their experience, they could probably add value to names that aren't in their database as well by applying learnings across names as a whole, e.g. whether certain strings in the name suggest it to be fake, or the structure of it to be good (the lead gen provider might pass in first and last name too).

Datran or others probably wouldn't want to share too much of the specifics but they could help come up with a score that would let those who just received the email gain some insight into the validity of the lead. Ideally, some third party would do this and Datran along with the other big mailers would participate, making their data accessible to the third party. The subscription revenue would be split among the data providers (with protections so that their data wouldn't be abused, competitor safegaurds, etc.). Given the forming a single organization (like Targus) who has access to the data owners (ex, Wireless carriers) takes more time, which is why the data carrier (Datran) could do this if they wanted.

I thought this comment worth highlighting in case any had ideas or interest in helping this reader. In some sense this is an Incentive 3.0 problem - rather than going for high value goods as a hook, find a value-add product or service where an add supported offer acts as payment. It's very much along Gratis' reasoning for going to Free Pay. This is a one-off need but imagine a platform where ads (filling out offers) was the currency and sites (NYTimes Select for example) could accept payment from this platform instead of hard currency. There are some timing issues involved - consumers would, like a bank account, want to fill it up in advance otherwise there would be a delay between what you want and your ability to get it. The reason being that filling out a credit card offer might earn a user Xpoints in their ad-wallet but those points thake six weeks before populating to the account. They won't want to wait six weeks before reading an article, but they might be willing to wait that long if they were subscribing to a magazine using the ad-wallet / ad-pay platform.

Anyway, on to the actual comment -

Submitted by Chris ParkerI developed a site called up4abuck.com which is a limited entry competition site where users pay $1 for a fixed odds chance to win that competition. I found the whole asking people for a dollar problematic and have done nothing with the site in over a year. I have always thought that if I could reduce the value of the competition prizes and find a way to generate advertising revenue without taking money from the customer, the current model could be very easily modified and the site could be extremely successful. I think incentives marketing could be the answer but I have no idea where to find willing advertisers. I know this is a bit cheeky but does anyone have any ideas?

I'll be heading to Vegas Wednesday May 3, 2006 for the Domain Industry conference. If you are in the area and want to meet-up, please email me - jay(at)oversee.net. I will be there only for the next day though.

Additionally, my apologies for those who tried accessing the site yesterday and could not. It appears typepad had issues (again).

On the blog front - I'll be posting Friday or Monday on the domain industry that combines much of the following:http://online.wsj.com/article/SB114360298137410850-search.htmlhttp://online.wsj.com/article/SB114057161829579643-search.htmlhttp://money.cnn.com/2005/11/30/technology/domains_biz20_1205/index.htmhttp://online.wsj.com/article/SB113200310765396752.html?mod=2_1198_3http://online.wsj.com/article/SB114644530844940115.htmlhttp://seattletimes.nwsource.com/html/businesstechnology/2002962245_google30.htmlhttp://publications.mediapost.com/index.cfm?fuseaction=Articles.san&s=42943&Nid=20123&p=305473